Expected Monetary Policy and the Dynamics of Bank Lending Rates

Claudia Kwapil (claudia.kwapil@oenb.at) and Johann Scharler (johann.scharler@jku.at)
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Claudia Kwapil: Oesterreichische Nationalbank, Economic Analysis Division, http://www.oenb.at
Johann Scharler: Department of Economics, University of Linz, http://www.oenb.at

Working Papers from Oesterreichische Nationalbank (Austrian Central Bank)

Abstract: In this paper we explore empirically to what extent expected monetary policy matters for the dynamics of bank lending rates in the U.S., the U.K. and Germany. We find that banks have increasingly behaved in a forward-looking fashion by taking expected changes in monetary policy rates into account when setting lending rates. We document that along with the shifts in monetary policy regimes towards inflation targeting, expected monetary policy has become more important as a determinant of bank lending rates. Overall, our results provide support for the hypothesis that monetary policy has become more effective by successfully influencing private sector expectations.

Keywords: Monetary Policy; Expectations; Interest Rate Pass-Trough (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 33
Date: 2009-01-30
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Journal Article: Expected monetary policy and the dynamics of bank lending rates (2013)
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